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TMI Blog2016 (12) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... t significant compared to the level of investment in shares and any case, obtained on security of liquid assets. Unsecured loans are from family members and after taking into account corresponding loans given to family members, the net amount is not significant. From the record, we also found that in the immediate preceding assessment year 2005-2006, assessment was framed u/s.143(3) r.w.s.153A dated 31/03/2010, wherein AO has accepted assessee‟s claim of short term capital gains on sale of shares, however, in the assessment year 2007-08 to 2009-2010, the AO has followed his order for assessment year 2006-07 without mentioning any peculiar facts for treating the capital gain as business income. We found that decision of Supreme Court in Radhasaomi Satsang vs. CIT (1991 (11) TMI 2 - SUPREME Court ) has been relied by CIT (A) on proposition that each year's assessment is final for that year does not govern later year and principle of res judicata is not applicable to income tax proceedings. In view of the above, we direct the AO to treat gain arising out of sale of shares as short term capital gains rather than business income. - ITA No.1959/Mum/2014 - - - Dated:- 5-12-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not at cost at market price, whichever is less. Attention was also invited to the dividend income regularly earned by the assessee on its investment and offered for tax as income from other sources and also accepted by the department. 6. Assessee‟s intention of having shares as investor is clear from the fact that during the year under consideration also the assessee has earned dividend income of ₹ 1,80,989/-. However, AO did not accept assessee‟s contention and treated short term capital gain as business income. 7. Learned AR appearing on behalf of the assessee relied on the decision of Co-ordinate Bench in case of Sidhalchal Enterprises Pvt. Ltd., in ITA No.8969/Mum/2010 dated 28/05/2015 where in Tribunal under similar facts and circumstances held as under:- 7. We have considered the rival contentions. There is no denial by the Revenue to the fact that the assessee has been investing the surplus business profits in purchase of shares since 1997 and it has always been accepted as an investor. For the year under consideration, the assessee has also been treated as investor in respect of income from share transactions claimed by the assessee as long ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urohit 336,ITR 287, in support of the proposition that there ought to be uniformity in treatment and consistency when facts and circumstances are identical. An SLP filed against this decision of Bombay High Court was dismissed by Hon‟ble Supreme Court vide its order dated 15/11/2010. 10. On the other hand, learned DR relied on the order of the lower authorities and contended that in view of high volume and frequency of transaction so entered by assessee during the year on account of purchase and sale of shares, the AO was justified in treating the income arising from such transaction as business income. 11. We have considered rival contentions and also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of instant case. From the record, we found that for the year under consideration assessee has filed its return of income on 31/07/2006 declaring income of ₹ 49,76,382/- which comprises of income from house property ₹ 4,93,234. (b) Long Term capital gains from sale of shares -Rs.6,21,563 (exempt). (c) Sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been treated as a trader because of certain tax benefits granted to an investor in securities by way of amendment in the relevant provisions of the Income Tax Act brought by Finance Act, 2004. By insertion of provisions of section 111A and section 10(38), the levy of tax has been reduced to 10% on short term capital gains and long term capital gains have been made exempt. Under the old provisions of the Act, profits or gains arising to an investor from the transfer of securities were charged depending on the period of holding of the said securities. Short term capital gains were taxed at applicable rates (normal rates) and long term capital gains were taxed at the rate of 20% after adjusting for inflation by indexing the cost of acquisition. For listed securities, the tax payer had an option to pay tax on long term capital gains at the rate of 10% but without indexation. In case of trader in securities, however, the capital gains were taxed as any other normal business income. Thus, tax liability on the income on sale and purchase of shares as regards to short term capital gains and business income was at par. The issue of treatment of income from share transaction as short ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) the Hon'ble Mumbai tribunal held that the fact that the AO accepted the appellant's claim in earlier years that it was an investor is material because though the principles of res judicata do not strictly apply to income tax proceedings it is well settled law that the principles of consistency should not be ignored. Uniformity in treatment and consistency under the same facts and circumstances is one of the fundamentals of the judicial principles which cannot be brushed aside without proper reason. 16. From the record, we found that assessee was having capital of ₹ 2.30 crores as against investment in shares of ₹ 1.21 crores. Thus, capital was much more than the investment in shares. There was secured loans of 5.23 lakhs against assessee‟s own Kisan Vikas Patra, and bank overdraft of ₹ 11.56 lacs against assessee‟s own FDR‟s. Thus, loan from bank was only against assessee‟s own security which cannot be treated as business advance. Assessee was also having loan from family members without any interest. From the record we also found that assessee has no business income. No evidence on record to suggest that assessee had any es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business loss. 20. Hon‟ble Bombay HC in CIT vs. Gopal Purohit (2011) 336 ITR 287 (Bom) held that there must be uniformity in treatment by income tax department in assessments on issue of share dealings by assesse - i.e. whether investment or business activity. Department's SLP against this order of Bombay High Court has been rejected by Supreme Court on 15-11-2010. 21. Also similar finding on rule of consistency by Mumbai IT AT decision in Siddhalchal Enterprises Pvt. Ltd. Vs. ITO A Bench ITA no.8969/Mum/2010 dated 28/5/2015 for A.Y.2006-07. 22. From the order of CIT(A) we found that Supreme Court decision in Trustee, Loka Shikshana Trust vs. CIT(A) on page 16, para no.27 of his order supports the case of assessee. Here, the Apex Court defined business as an occupation which engaged the time, attention and labour of the person normally with object of making profit. 23. Reliance can also be placed on Supreme Court decision in CIT vs. H. Holck Larsen (1986) 160 ITR 67 (SC) wherein, it was held that activities undertaken by an investor in purchase and sale of shares to nurse his investment in shares and avoid erosion of its value of shares does not amount t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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